PDSNET Market Snapshot

Perhaps the best way to measure the progress of South Africa as a country is to look at our currency – especially against the so-called hard currencies of the Western World. Its strength or weakness gives a very good overall picture of how the country is doing economically, politically and in terms of its image with overseas investors.

As an emerging economy, South Africa is not regarded as a poor country, but rather as one which is striving to become first world. For overseas investors this typically means a country and a currency which offers high risk and high potential return. Whereas a 10-year US Treasury Bill can offer the international investor a return of 4,8%, a South African 10-year government bond offers around 8,8% - that is 4% better, if the investor is prepared to take the risk of investing here.

We have a number of advantages over other emerging markets. Perhaps most importantly, we have relatively low inflation. In fact, due to the tireless efforts of Lesetja Kganyago, Governor of the Reserve Bank, our inflation rate is very comparable to many First World countries – and certainly far better than many of the other emerging economies. For example, Turkey’s inflation rate is 31,5%, Argentina is at 33,8% Egypt is at 14,9% and Columbia is at 6%.

We are generally grouped among those less risky emerging economies with lower inflation rates like Brazil (4,6%), India (4,4%), Mexico (3,4%), Indonesia (2,9%), and South Korea (2,8%). These are very comparable to the inflation rates of First World economies like Europe (3,3%), the United Kingdom (2,9%) and America (3,4%).

Approximately $19bn worth of rands are traded in our currency market every day on average. This makes it a highly liquid and very free currency exchange. Overseas investors can quickly take or sell large positions in what is a strong and well-organised market. This has tended to mean that the rand has become a proxy for all emerging economies. When international sentiment is risk-on they pile into our currency and government bonds. When it is risk-off, as it was when Trump began his war with Iran, they sell out quickly.

But overall, for at least the past 17 months the rand has been steadily appreciating against most first world currencies. In our view, this is related to the stabilising impact of the government of national unity (GNU) and the fact that the ANC is no longer in complete control. This together with the various initiatives set in motion by President Ramaphosa have meant that the economic environment has been steadily improving since April 2025.

On 10th April 2025 one euro would have cost you R21,90 and today it costs R18,53. On the same day, one British pound would have cost you R25,34 whereas today it costs only R21,56 and of course over the same time period the US dollar has fallen from being worth R19,75 to being worth R15,96. Consider the chart:

What is significant about this chart is that it clearly shows the steady improvement in international sentiment towards South Africa. The massive, well-informed international investors of the world are betting on our country and putting their money here instead of elsewhere. That is a significant vote of confidence and one which many South Africans caught up in the cut and thrust of daily life here do not appreciate.

In our view, the rand is about to break below its previous cycle low of R15.79 to the US$ made on 29th January 2026. The outcome of the municipal elections on 3rd November 2026 will have a significant impact. If the ANC loses further ground and the DA gains ground (which is what we believe will happen) then you can expect the rand to appreciate further.

A stronger rand is good for everyone in South Africa. It means lower fuel prices, lower inflation, lower interest rates, more stability and a better future for everyone involved in the economy. It is the most telling and reliable indicator of our progress as a nation.

The gold price has been in a persistent correction since its record high on 28th January 2026. It has been in what technical analysts call a descending flag formation which we have drawn you attention to on several occasions. As with any formation we are looking for the direction of the breakout from that formation to give a clear idea of the future trend. In the case of gold, we have always been confident that it would break to the upside – and that is what it did last week on 19th August 2026. Consider the chart:

The chart shows the US dollar price of gold since August 2022. It broke up out of a long-term sideways pattern in March 2024, and we drew your attention to that in the Confidential Report at the time. The chart shows how the upward trend was paused in 2025 until the precious metal broke above resistance at $3424 and it shows the all-time record high of $5305 on 28th January 2026.

The flag formation has taken place between two parallel downward sloping trendlines, showing how gold lost about $1000 over 5 months then found support before breaking to the upside.

As a private investor you should be thinking about which shares would have enabled you to capitalise on gold’s amazing run – and one of the best was Harmony. Of course, gold shares are always going to be speculative and risky, but under the right circumstances they can provide an excellent long-term investment.

In the case of Harmony, the key, for us, was its purchase of the Mponeng gold mine for $200m in September 2020. This was a very brave, potentially dangerous acquisition and we waited for some time before recognising that they were making a success of it. Mponeng is the deepest mine in the world. It is currently mining at depths of around 3800 meters with plans to go deeper to 4200 meters. This means that it is operating 2 kilometres below sea level from the Highveld near Carletonville. At those depths the grade is excellent - around 11,27 grams per ton – more than double the average grade for South African gold mines. The problem is that mining at those extreme depths is expensive and potentially very dangerous. It is the very definition of a high-risk, high-return investment.

We added Harmony to the Winning Shares List (WSL) on 16th November 2023 at a price of 9920c per share. It reached an all-time high of 40841c on 28th January this year before falling back as gold corrected. Since 3rd August 2026 it has been moving up strongly again as gold recovered. Consider the chart:

Harmony published an excellent trading statement on Friday last week, predicting that its headline earnings per share (HEPS) would increase by between 90% and 105% in US dollars. 

Altogether, Harmony has risen by more than 250% since we added it to the WSL nearly 3 years ago and we believe it will continue to perform well – but it remains a commodity share and hence both volatile and risky.

A couple of weeks ago we wrote an article about the sideways market that the S&P500 was in at the time. In that article we pointed out that while the market had been moving sideways for three months, the actual companies which the market represented had been continuing to grow and develop. We anticipated that the market would break to the upside out of that flag formation and that when it did it would have to catch up the growth of the previous three months. Consider the chart:

The chart shows how the S&P was moving sideways between the previous record high of 7609 made on the 6th of June 2026 and the low of 7267 made on the 10th of June 2026. Then on the 4th of August 2026 the S&P broke strongly to the upside and made a series of new record highs – just as we expected.

From a fundamental perspective, lower-than-expected inflation and a slower level of job creation gave the market hope that the Federal Reserve Bank would not raise interest rates again at the next meeting of the monetary policy committee (MPC) on the 15th and the 16th September 2026. The consumer price index (CPI) fell to 3,4% in July 2026 from June’s figure of 3,5%. The drop gave investors hope that the worst of the effects of the Iran fuel price hike were behind and that inflation was again moving down.

The producer price inflation figure for the year to the 31st of July 2026 was also encouraging at 4,7% - significantly lower than June’s figure of 5,5% and reflecting the drop-off in the oil price. We believe that interest rates in America will probably remain unchanged until the end of this year.

The stalemate in Trump’s war and its impact on world oil prices appears to have stabilized with North Sea Brent Oil hovering roughly $15 per barrel above where it was before the war began. While developments in the war are still a factor, investors’ attention is back to focusing on the figures coming out of the companies which make up the S&P, especially the so-called Magnificent Seven.

In Q2 2026, Apple was the hero with earnings per share (EPS) up an impressive 29% year-on-year, followed by Microsoft’s 32% gain. Alphabet, Amazon, Meta, and Tesla delivered solid revenue, above forecast, but this was heavily counterbalanced by massive capital expenditure increases mainly for artificial intelligence infrastructure.

Nvidia is reporting its results for the second quarter in a few days’ time on the 26th of August 2026. Wall Street is anticipating another blowout quarter with analysts looking for exponential growth fuelled by the relentless demand for artificial intelligence infrastructure.

What is also clear to us is that Americans are expecting Trump and the Republicans to perform very badly in the coming November mid-term elections, almost certainly losing the House of Representatives and possibly even the Senate. If this happens, it will make Trump into a “lame dog” president, unable to pass any legislation against Democrat opposition. There is also now the clear possibility that he could be forced to resign as a result of increasingly poor health or because he is impeached.

Whatever happens it is clear that his influence over the stock market is declining rapidly. The market has lost interest in his interminable erratic announcements on Truth Social and is instead caught up in the excitement over the productivity benefits of new technologies.

We expect that the S&P will continue to climb to further new record highs and take all world markets up with it, including the JSE.